MetLife v. Glenn

U.S. Congress enacted the Employee Retirement Income Security Act ("ERISA" or the "Act"), 29 U.S.C. §1001 et seq., to protect the interests of employees covered by employee benefit plans and to encourage the cost-effective growth of such programs.  § ERISA provides participants appropriate remedies, sanctions, and ready access to federal courts to challenge a denial of benefits. §

In Firestone Tire & Rubber Co. v. Bruch, the U.S. Supreme Court held that federal courts must apply a de novo standard of review when reviewing a denial of benefits under ERISA, unless the benefit plan gives plan administrators discretionary authority to determine eligibility.  The Court noted, however, that a more searching review is necessary in the case of a conflicted decision-maker.  The Court stated that the conflict itself "must be weighed as a facto[r] in determining" whether the program administrator violated ERISA. 

ERISA acknowledges that a benefits plan may require a plan administrator to serve in more than one fiduciary capacity. § In other words, a benefits plan may charge an individual to authorize the lawful payment of benefits and, simultaneously, to protect the financial health of the insurance company funding those benefits.  If an administrator denies a legitimate claim for benefits to protect its own financial interest, however, it has violated ERISA.  In this case, the Supreme Court must determine whether a federal court, in reviewing a claim-denial under ERISA, must consider a "dual-role" program administrator to be a "conflicted decision-maker" under Firestone. 

Should Reviewing Courts Consider Conflicts of Interest?

The Sixth Circuit has answered that question affirmatively, ruling that courts must consider "conflicted decision-makers" when reviewing claim-denials and weigh that factor when determining whether the administrator's decisions were arbitrary and capricious.  In Killian, the Sixth Circuit explained that a plan administrator who serves a dual function has a financial incentive to deny benefits-if she authorizes the payment of benefits, the plan incurs the expense of payment, but if she denies their payment, the plan profits.  In this regard, the Sixth Circuit aligns with the Fourth, Fifth, Eighth, Ninth, and Eleventh Circuits: each hold that such a possible conflict must be considered and weighed by the court.  By comparison, the First and Seventh Circuits hold that, absent a showing that the conflict actually influenced claim-denials, courts need not consider dual roles to create conflicts that courts such must weigh on review. 

MetLife argues that the Supreme Court's decision in Pegram v. Herdrich, 530 U.S. 211 (2000), renders the Sixth Circuit rule inapplicable.  In Pegram, the Supreme Court acknowledged that ERISA authorizes a fiduciary to "have financial interests adverse to beneficiaries."  The Court explained that ERISA does not bar a fiduciary from having a financial duty to someone other than the plan beneficiary.  It noted, however, that the fiduciary must consider only its duty to the plan beneficiary when deciding whether to authorize the payment of benefits.  Because ERISA contemplates that a plan administrator may have dual roles, Metlife reasons, ERISA does not require a court to consider this potential conflict of interest in judicial review.  By contrast, Glenn urges the Supreme Court to uphold the Sixth Circuit's decision.  Glenn argues that regardless of whether ERISA recognizes such a role, there is always a risk that a conflicted fiduciary may "occasionally indulge its own financial interests at the expense of claimants." 

While the parties agree that trust law principles apply to ERISA claims, they dispute what trust law dictates in this context.  MetLife contends that trust law permits a trustee to serve in settings where his decision could potentially further his own interest, as long as that arrangement is contemplated in the trust documents.  MetLife thus urges the Court to consider that conflict only when the plaintiff can show that the fiduciary acted upon his or her self-interest when making the challenged decision.  While Glenn does not challenge this principle, she argues that MetLife's proposal fails to adequately protect plan beneficiaries.  She points out that trust law grants a "general recognition that a trustee-beneficiary's conduct is to be closely scrutinized for abuse including abuse by less than appropriate regard for the duty of impartiality." 

In making its decision, the Court will likely consider Congress' goals in enacting ERISA.  Because Congress intended ERISA to encourage the development of employee benefit plans, MetLife argues that judicial review of that conflict of interest would increase the administrative and financial burdens already faced by plan administrators.  MetLife also claims that the rule would encourage participants with dubious claims to file suit "in the hope of convincing a court to second-guess the plan's claim determination."  Glenn asserts, however, that the Court has previously acknowledged that ERISA's overarching purpose is "to promote the interests of employees and their beneficiaries in employee benefit plans." .

If Reviewing Courts Consider Conflicts, How Should Courts Weigh this Factor?

If the Court agrees with Glenn that a fiduciary's potential conflict of interest must be considered on review, it must then explain what kind of review the court should perform. MetLife urges the Court to assume a deferential "abuse of discretion" standard.  Per Metlife, courts should give "de minimus" weight to any potential conflict of interest. 

Glenn, however, asks the Court to adopt a much more searching review.  Glenn asserts that, when a conflict of interest exists, the conduct of the trustee should be subject to "especially careful scrutiny."  After explaining that "especially careful scrutiny" requires more than a mere inquiry into the reasonableness of the plan administrator's decision, Glenn lists three components of the test: "...(1) demand complete and careful explanations; (2) cast a skeptical eye on the explanations they do receive; and (3) exhibit little tolerance for analytical flaws or evidentiary gaps."